YOUNGSTOWN, Ohio--(BUSINESS WIRE)--
United Community Financial Corp. (Company) (UCFC), parent company of Home Savings Bank (Home Savings), announced today net income of $9.5 million and diluted earnings per share (“EPS”) of $0.190, a 16.6% improvement over the $0.163 per common share reported for the quarter ended June 30, 2017.
Second quarter 2018 highlights:
- Total loan growth of 12.9% over the last twelve months, and 3.1% on a linked quarter basis
- Monthly average customer deposit growth of 10.1% over the last twelve months, and 2.2% over the last three months
- ROA of 1.40%, ROE of 12.56%, ROTE of 13.65% for the quarter
- Dividend increase of 17% to $0.07 per common share declared
Gary M. Small President and Chief Executive Officer of the Company commented, “We are pleased with the quarterly performance results and the ongoing progress on our strategic initiatives focused on loan, deposit and revenue growth. Each market and business unit is showing improvement and our client base is expanding. Loan growth, outstanding credit performance, and a well-managed expense base continue to be strong points for the organization. Deposit growth over the past year has been outstanding and remains a central focus for the team.”
Strong Loan and Deposit Growth
Total loans grew $252.2 million, or 12.9%, during the previous twelve months ended June 30, 2018, and $66.7 million, or 3.1% compared to the previous quarter. At June 30, 2018, total net loans and loans held for sale aggregated $2.21 billion.
Home Savings has produced excellent results over all lending categories. The increase in total loans for the period was driven by an increase in commercial loans, which grew $158.6 million, or 21.4%, over the last twelve months and $27.7 million, or 3.2%, versus March 31, 2018. Mortgage loans (including loans held for sale) increased $59.5 million, or 6.1%, over the previous twelve months and increased $32.3 million, or 3.2%, during the past three months. Consumer loans increased $33.8 million, or 13.4%, since June 30, 2017 and $5.8 million, or 2.1%, since the previous quarter.
Monthly average customer deposits (which exclude brokered certificates of deposit) increased 10.1% from June 30, 2017 and 2.2% from March 31, 2018. The growth in average customer deposits was driven by increases in average non-interest bearing accounts of 12.7% over the past twelve months and an increase of 0.60% over the past three months. Average business deposits continue to rise, increasing 16.6% over the past twelve months and 2.8% over the past three months. The Company continues to experience deposit gains from all lines of business including treasury management, private banking, consumer and public funds.
Net Interest Margin
The net interest margin was 3.36% for the three months ended June 30, 2018 compared to 3.47% for the previous quarter. This eleven basis point decrease is the result of three separate items. First, a one time prepayment penalty on a commercial loan in the first quarter 2018 increased the margin five basis points in that quarter. Secondly, purchase accounting adjustments were two basis points less favorable to the margin than the first quarter of 2018. Lastly, the remaining four basis point difference is the result of a 38 basis point increase in cost of Federal Home Loan Bank advances.
Excluding the impact of purchase accounting yield adjustments, the net interest margin would have been 3.29%, or seven basis points lower than the 3.36% reported, for the quarter ended June 30, 2018.
Small continued, “The flattening yield curve presents challenges for all in the banking industry and adds more volatility to Home Savings’ net interest margin management. We are operating within our expected margin range and are funded well for additional growth.”
Nonperforming Loans to Total Loans Ratio Decreases during the Second Quarter
Asset quality remained very strong during the second quarter. The Company’s level of nonperforming loans, delinquencies and classified assets all improved during the quarter. Net chargeoffs for the quarter were 1.3 basis points of average loans. Additionally, over the past three months, the ratio of the allowance for loan losses as a percent of loans has increased from 177.5% to 198.4% at June 30, 2018. Nonperforming loans to total loans at June 30, 2018 declined to 0.51%. Delinquent loans to total loans are down to 0.67% at June 30, 2018.
The Company recognized a negative provision for loan losses of $138,000 for the second quarter of 2018, which was down $545,000 in comparison to the previous quarter. Continued asset quality improvements, and an improved credit environment, combined with a favorable change in loan portfolio mix resulted in the need for a lower required provision. As of June 30, 2018, the Company’s allowance for loan losses to total loans was 1.01%, versus 1.04% at March 31, 2018.
Loans acquired through the acquisition during the first quarter of 2017 were recorded at fair value. When combining the remaining fair value adjustment of $3.0 million and the Company’s allowance, the Company’s allowance as a percentage of total loans increases to 1.15%.
Non-interest income decreased $1.2 million to $5.9 million for the second quarter of 2018 compared to $7.1 million for the same quarter last year. Significantly affecting this comparison is mortgage banking income being lower by $912,000, or 43.1%. The volume of mortgage loan production increased 17% and is very favorable to the prior year, however, as experienced industry-wide, market competitiveness continues to impact the margin on saleable loans.
On a year to date basis, mortgage banking income was down 25.5% compared to the same period last year.
Also affecting non-interest income, security gains were down $207,000 when compared to the second quarter of 2017. Lastly, debit/credit card fee income was down $149,000, when compared to the second quarter of 2017 due primarily to a one-time VISA credit as a result of the implementation of a more secure chip debit card, which did not reoccur in 2018.
Small added, “Home Savings’ residential mortgage team has delivered double-digit production growth over the past year, well in excess of the industry benchmark. The landscape is more competitive than ever and pricing has gotten very aggressive. While narrowed pricing is having an adverse impact on gain on sale income, we also see our portfolio yields increasing and our related operating costs decreasing. On balance, the business unit performance remains strong, and we remain very committed to our residential mortgage clients.”
Non-interest expense was $15.5 million for the second quarter of 2018 compared to $15.2 million during the second quarter of 2017, an increase of $354,000, or 2.3%. This increase is reflective of higher salary and employee benefits costs associated with the hiring of additional revenue generating staff in the latter half of 2017. The Company’s efficiency ratio remains consistent at 57.8%.
Effective Tax Rate
The Company’s effective tax rate on an FTE basis at June 30, 2018 was 19.5% compared to 30.6% at June 30, 2017. The decline was due to the enactment of tax legislation at the end of the year.
Dividend to be Paid
On July 17, 2018, the Board of Directors declared a 17% increase to the quarterly cash dividend to $0.07 per common share payable August 10, 2018 to shareholders of record July 27, 2018.
United Community Financial Corp. will host an earnings conference call on Wednesday, July 18, 2018, at 10:00 a.m. ET, to provide an overview of the Company's second quarter 2018 results and highlights. The conference call may be accessed by calling 1-877-272-7661 ten minutes prior to the start time. Please ask to be joined into the United Community Financial Corp. (UCFC) call. Additionally, a live webcast may be accessed from the Company’s website ir.ucfconline.com. Click on 2nd Quarter 2018 Conference Call on our corporate profile page to join the webcast.
United Community Financial Corp.
Home Savings is a wholly owned subsidiary of the Company and operates retail banking offices and loan production centers in Ohio, western Pennsylvania and West Virginia. Additional information on the Company, Home Savings and James & Sons Insurance may be found on the Company’s web site: ir.ucfconline.com.
When used in this press release, the words or phrases “believes,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project”, “will have”, “can expect” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
|UNITED COMMUNITY FINANCIAL CORP.|
|CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION|
|June 30,||December 31,|
|(Dollars in thousands)|
|Cash and deposits with banks||$||32,584||$||34,365||-5.2||%|
|Federal funds sold||34,393||12,515||174.8||%|
|Total cash and cash equivalents||66,977||46,880||42.9||%|
|Available for sale, at fair value||247,630||270,561||-8.5||%|
|Held to maturity (fair value of $78,194 and $82,126, respectively)||81,294||82,911||-2.0||%|
|Loans held for sale, at lower of cost or market||—||211||-100.0||%|
|Loans held for sale, at fair value||107,701||83,541||28.9||%|
|Loans, net of allowance for loan losses of $21,405 and $21,202||2,099,781||1,999,877||5.0||%|
|Federal Home Loan Bank stock, at cost||19,324||19,324||0.0||%|
|Premises and equipment, net||21,645||22,094||-2.0||%|
|Accrued interest receivable||8,454||8,190||3.2||%|
|Real estate owned and other repossessed assets||877||1,253||-30.0||%|
|Core deposit intangible||1,769||1,934||-8.5||%|
|Customer list intangible||1,980||2,060||-3.9||%|
|Cash surrender value of life insurance||63,354||62,488||1.4||%|
|Liabilities and Shareholders' Equity|
|Federal Home Loan Bank advances|
|Total Federal Home Loan Bank advances||296,927||356,536||-16.7||%|
|Repurchase agreements and other||191||197||-3.0||%|
|Total borrowed funds||297,118||356,733||-16.7||%|
|Advance payments by borrowers for taxes and insurance||19,253||25,038||-23.1||%|
|Accrued interest payable||964||1,097||-12.1||%|
|Accrued expenses and other liabilities||16,394||16,033||2.3||%|
|Preferred stock-no par value; 1,000,000 shares authorized and no shares outstanding||—||—||0.0||%|
Common stock-no par value; 499,000,000 shares authorized; 54,138,910 shares issued and 49,904,074 and 49,800,126 shares, respectively, outstanding
|Accumulated other comprehensive loss||(24,077||)||(18,685||)||28.9||%|
|Treasury stock, at cost, 4,234,836 and 4,338,784 shares, respectively||(31,715||)||(32,360||)||-2.0||%|
|Total shareholders’ equity||301,484||294,265||2.5||%|
|Total liabilities and shareholders’ equity||$||2,770,558||$||2,649,905||4.6||%|
|UNITED COMMUNITY FINANCIAL CORP.|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|For the Three Months Ended||For the Six Months Ended|
|June 30,||March 31,||June 30,||June 30,||June 30,|
|(Dollars in thousands, except per share data)|
|Loans held for sale||1,012||858||17.9||%||872||16.1||%||1,870||1,533||22.0||%|
|Available for sale, nontaxable||356||388||-8.2||%||418||-14.8||%||744||836||-11.0||%|
|Available for sale, taxable||1,193||1,215||-1.8||%||1,479||-19.3||%||2,408||3,081||-21.8||%|
|Held to maturity, nontaxable||61||51||19.6||%||52||17.3||%||112||114||-1.8||%|
|Held to maturity, taxable||398||422||-5.7||%||454||-12.3||%||820||919||-10.8||%|
|Federal Home Loan Bank stock dividends||274||280||-2.1||%||227||20.7||%||554||441||25.6||%|
|Other interest earning assets||92||77||19.5||%||40||130.0||%||169||120||40.8||%|
|Total interest income||26,661||26,050||2.3||%||23,553||13.2||%||52,711||44,613||18.2||%|
|Federal Home Loan Bank advances||1,576||1,420||-11.0||%||1,064||-48.1||%||2,996||2,019||-48.4||%|
|Repurchase agreements and other||—||—||0.0||%||8||100.0||%||—||16||100.0||%|
|Total interest expense||5,366||4,517||-18.8||%||3,059||-75.4||%||9,883||5,643||-75.1||%|
|Net interest income||21,295||21,533||-1.1||%||20,494||3.9||%||42,828||38,970||9.9||%|
|Taxable equivalent adjustment||90||97||-7.2||%||229||-60.7||%||187||466||-59.9||%|
|Net interest income (FTE) (1)||21,385||21,630||-1.1||%||20,723||3.2||%||43,015||39,436||9.1||%|
|Provision for loan losses||(138||)||407||133.9||%||842||116.4||%||269||2,317||88.4||%|
|Net interest income after provision for loan losses (FTE)||21,523||21,223||1.4||%||19,881||8.3||%||42,746||37,119||15.2||%|
|Insurance agency income||513||577||-11.1||%||472||8.7||%||1,090||945||15.3||%|
|Service fees and other charges:|
|Deposit related fees||1,392||1,300||7.1||%||1,411||-1.3||%||2,692||2,701||-0.3||%|
|Mortgage servicing fees||813||812||0.1||%||729||11.5||%||1,625||1,465||10.9||%|
|Mortgage servicing rights valuation||(20||)||9||-322.2||%||(2||)||900.0||%||(11||)||(5||)||-120.0||%|
|Mortgage servicing rights amortization||(542||)||(500||)||8.4||%||(486||)||11.5||%||(1,042||)||(935||)||-11.4||%|
|Other service fees||61||38||60.5||%||33||84.8||%||99||62||59.7||%|
|Net gains (losses):|
|Securities available for sale||94||139||-32.4||%||301||-68.8||%||233||330||-29.4||%|
|Mortgage banking income||1,205||1,358||-11.3||%||2,117||-43.1||%||2,563||3,440||-25.5||%|
|Real estate owned and other repossessed assets charges, net||(113||)||(78||)||44.9||%||(18||)||527.8||%||(191||)||(70||)||-172.9||%|
|Debit/credit card fees||1,177||949||24.0||%||1,326||-11.2||%||2,126||2,249||-5.5||%|
|Trust fee income||473||469||0.9||%||420||12.6||%||942||702||34.2||%|
|Total non-interest income||5,852||5,819||0.6||%||7,090||-17.5||%||11,671||12,474||-6.4||%|
|Salaries and employee benefits||8,937||9,998||10.6||%||8,749||-2.1||%||18,935||17,724||-6.8||%|
|Equipment and data processing||2,372||2,154||-10.1||%||2,306||-2.9||%||4,526||4,385||-3.2||%|
|Financial institutions tax||495||496||0.2||%||510||2.9||%||991||1,000||0.9||%|
|Amortization of intangible assets||132||113||-16.8||%||113||-16.8||%||245||196||-25.0||%|
|FDIC insurance premiums||288||290||0.7||%||340||15.3||%||578||528||-9.5||%|
|Other insurance premiums||109||109||0.0||%||109||0.0||%||218||221||1.4||%|
|Other professional fees||499||391||-27.6||%||420||-18.8||%||890||940||5.3||%|
|Real estate owned and other repossessed asset expenses||34||36||5.6||%||23||-47.8||%||70||85||17.6||%|
|Acquisition related expenses||—||—||0.0||%||—||0.0||%||—||4,962||100.0||%|
|Total non-interest expenses||15,530||16,600||6.4||%||15,176||-2.3||%||32,130||35,466||9.4||%|
|Income before income taxes||11,845||10,442||13.4||%||11,795||0.4||%||22,287||14,127||57.8||%|
|Taxable equivalent adjustment||90||97||7.2||%||229||60.7||%||187||466||59.9||%|
|Income tax expense||2,214||1,789||-23.8||%||3,377||34.4||%||4,003||3,934||-1.8||%|
|Earnings per common share:|
Net interest income is also presented on a fully taxable equivalent (FTE) basis, the Company believes this non-GAAP measure is the preferred industry measurement for this item.
|UNITED COMMUNITY FINANCIAL CORP.|
|CONSOLIDATED AVERAGE BALANCES|
|For the three months ended|
|June 30, 2018||March 31, 2018||June 30, 2017|
|(Dollars in thousands)|
|Interest earning assets:|
|Net loans (1)||$||2,075,307||$||23,275||4.49||%||$||2,026,266||$||22,760||4.49||%||$||1,863,525||$||20,012||4.30||%|
|Loans held for sale||91,836||1,012||4.42||%||80,681||858||4.31||%||80,205||872||4.35||%|
|Total loans, net||2,167,143||24,287||4.48||%||2,106,947||23,618||4.49||%||1,943,730||20,884||4.30||%|
|Available for sale-taxable||207,908||1,193||2.30||%||211,332||1,215||2.30||%||258,217||1,479||2.29||%|
|Available for sale-nontaxable (2)||50,710||429||3.38||%||54,737||472||3.45||%||59,209||619||4.18||%|
|Held to maturity-taxable||70,406||398||2.26||%||72,627||422||2.32||%||80,817||454||2.25||%|
|Held to maturity-nontaxable (2)||11,265||78||2.77||%||9,227||63||2.73||%||9,843||79||3.21||%|
|Federal Home Loan Bank stock||19,324||274||5.67||%||19,324||280||5.80||%||19,324||227||4.70||%|
|Other interest earning assets||23,831||92||1.55||%||22,479||77||1.39||%||22,129||40||0.72||%|
|Total interest earning assets||2,550,587||26,751||4.20||%||2,496,673||26,147||4.19||%||2,393,269||23,782||3.97||%|
|Non-interest earning assets||174,270||176,785||180,524|
|Interest bearing liabilities:|
|Certificates of deposit|
|Customer certificates of deposit||608,079||2,143||1.41||%||581,858||1,817||1.27||%||504,397||1,166||0.92||%|
|Brokered certificates of deposit||164,400||673||1.64||%||165,169||566||1.39||%||133,082||314||0.94||%|
|Total certificates of deposit||772,479||2,816||1.46||%||747,027||2,383||1.29||%||637,479||1,480||0.93||%|
|Total interest bearing deposits||1,718,639||3,790||0.88||%||1,644,165||3,097||0.76||%||1,579,438||1,987||0.50||%|
|Federal Home Loan Bank advances|
|Total Federal Home Loan Bank advances||285,546||1,576||2.21||%||313,925||1,420||1.83||%||334,623||1,064||1.27||%|
|Repurchase agreements and other||195||—||0.00||%||213||—||0.00||%||4,844||8||0.66||%|
|Total borrowed funds||285,741||1,576||2.21||%||314,138||1,420||1.83||%||339,467||1,072||1.26||%|
|Total interest bearing liabilities||$||2,004,380||5,366||1.07||%||$||1,958,303||4,517||0.94||%||$||1,918,905||3,059||0.64||%|
|Non-interest bearing liabilities|
|Total noninterest bearing deposits||376,905||375,142||333,784|
|Other noninterest bearing liabilities||39,839||40,729||38,771|
|Total noninterest bearing liabilities||416,744||415,871||372,555|
|Total liabilities and equity||$||2,724,857||$||2,673,458||$||2,573,793|
|Net interest income and interest rate spread||$||21,385||3.13||%||$||21,630||3.25||%||$||20,723||3.33||%|
|Net interest margin||3.36||%||3.47||%||3.46||%|
|Average interest earning assets to average interest bearing liabilities||127.25||%||127.49||%||124.72||%|
|Interest bearing deposits|